Tailored Brands said yesterday that it has emerged from bankruptcy protection following a financial restructuring process that helped the U.S. men's fashion retailer eliminate $686 million of debt from its balance sheet, Reuters reported. The Houston-based company in August filed for chapter 11 protection, joining a list of brick-and-mortar retailers succumbing to the hit from the COVID-19 pandemic. It confirmed a restructuring plan last month that consisted of a $430 million lending facility. Tailored Brands said on Tuesday it now operates with a capital structure that includes an exit term loan of $365 million, which it expects will support its ongoing operations and strategic initiatives. The company in July announced plans to cut its workforce by 20 percent and shut as many as 500 stores, in response to the impact of the pandemic.
Ascena Retail Group Inc. wound up bankrupt after cobbling together a collection of clothing retailers that racked up losses for years. Now a new owner with a history of taking on tarnished brands will try to fix them, Bloomberg News reported. Ascena last week said that it agreed to sell its Ann Taylor, Loft, Lane Bryant and Lou & Grey brands to Sycamore Partners for $540 million. Sycamore said it planned to keep “a substantial portion” of the brands’ stores and workers. The private equity firm’s agreement to buy the brands comes as the retailer was seeking to confirm its chapter 11 plan. A related bankruptcy hearing has been delayed twice, according to recent court documents. Ascena already got court permission to sell its Justice and Catherines brands, leaving the parent as a bankrupt estate in wind-down. Ascena filed for bankruptcy in July with a plan to close about 1,600 of its 2,800 stores, including all of those in its Catherines chain.
A month after filing for chapter 11 protection, the U.S. Bankruptcy Court for the District of Delaware on Monday approved a pre-packaged restructuring plan for mall owner Pennsylvania Real Estate Investment Trust (PREIT), the Philadelphia Business Journal reported. The Philadelphia company expects to emerge from bankruptcy in early December, later than its initial expectation to be done with the proceedings by the end of November. PREIT is hopeful the reorganization will give it more time and money to become a stronger company. Under the plan, the shopping mall owner will have access to $130 million in new financing as it relates to a senior unsecured facility and the elimination of a $20 million revolving facility designated for repaying mortgages. The company also said that as part of the reorganization, its debt maturity schedule will be extended by three years. None of these proposals are final until the agreements are executed and the company emerges from bankruptcy. PREIT voluntarily filed Nov. 1 for chapter 11 protection after Strategic Value Partners, which owns 5 percent of PREIT’s debt, objected to a restructuring plan that 95 percent of PREIT’s other lenders approved. Strategic Value Partners finally relented and approved the pre-packaged plan. PREIT has continued to operate its malls during bankruptcy. When it filed for bankruptcy, PREIT listed $2.4 billion in total assets and total debt of just over $2 billion. Of its debt, $913 million is an unsecured loan with Wells Fargo, which is its largest creditor.
NPC International Inc., the nation’s largest franchisee of Pizza Hut and Wendy’s restaurants, canceled auctions for all of its assets last night, paving the way for a potential sale of the entire company to the Flynn Restaurant Group LLC, WSJ Pro Bankruptcy reported. Wendy’s Co. has opposed the sale to Flynn, the largest restaurant franchisee in the U.S., and instead has made its own offer with a consortium of regional franchisees. Wendy’s is in talks with NPC to drop its opposition in return for an agreement by Flynn to invest tens of millions of dollars in NPC’s Wendy’s restaurants. San Francisco-based Flynn owns more than 1,200 restaurants, including Applebee’s, Arby’s, Taco Bell and Panera Bread brands across 33 states. Some of those brands compete with Wendy’s. Wendy’s continues to be an active participant in the chapter 11 sales process, including its continued pursuit of a consortium bid with a group of prequalified franchisees, a spokesperson for Wendy’s said. NPC canceled three separate auctions for its Pizza Hut and Wendy’s franchises, as well as for the whole company, which were scheduled for last week and this week, according to court filings. A bankruptcy judge already designated Flynn’s $816 million offer for NPC as the best offer last month, subject to higher and better offers at auctions for the company’s assets. The sale to Flynn requires approval by the bankruptcy court.
A bipartisan group of senators is holding discussions to try to get a deal on a fifth round of coronavirus relief amid a months-long stalemate between congressional leadership and the White House, The Hill reported. The talks are one of the first signs of life for a potential coronavirus agreement as congressional Democrats, Senate Majority Leader Mitch McConnell (R-Ky.) and the White House have remained far apart on both the price tag and the policy details. The group includes Republican Sens. Mitt Romney (Utah), Rob Portman (Ohio) and Susan Collins (Maine) as well as Democratic Sens. Chris Coons (Del.), Joe Manchin (W.Va.), Mark Warner (Va.), Michael Bennet (Colo.) and Dick Durbin (Ill.), the No. 2 Senate Democrat. Senators involved in the talks are eyeing an eventual government funding deal as a vehicle for coronavirus relief. Congress has to fund the government — either with a full-year omnibus or with a short-term continuing resolution — by Dec. 11. Any effort to revive the chances of another coronavirus deal faces an uphill path, even as cases climb across the country and some cities and states reinstate restrictions to try to curb the spread of the disease heading into what health experts expect to be a brutal winter season. McConnell has stood firm at pushing for a roughly $500 billion spending package similar to what has been blocked twice in the Senate. Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) say $2.2 trillion is the starting line for any negotiations. Read more.
In related news, Federal Reserve Chairman Jerome Powell said that the central bank’s actions to backstop a range of credit markets after the coronavirus convulsed Wall Street this past spring had unlocked almost $2 trillion to support businesses, cities and states, the Wall Street Journal reported. In testimony prepared for delivery at a congressional hearing today, Powell said that the Fed’s unprecedented steps to stabilize financial markets had largely succeeded in restoring the flow of credit from private lenders. Treasury Secretary Steven Mnuchin on Nov. 19 told Powell that he would not grant extensions for five lending programs that have backstopped markets for corporate and municipal debt and to purchase loans made to small businesses and nonprofits when those programs expire on Dec. 31. Powell didn’t elaborate in his testimony, released yesterday, about the central bank’s disagreement with Mnuchin’s decision. The Fed had earlier said that it would have preferred the lending programs had stayed open because the pandemic emergency hasn’t receded. Mnuchin is slated to testify alongside Powell at today’s hearing and didn’t address the conflict in his prepared testimony. Read more. (Subscription required.)
Click here to access a live web stream of the Senate Banking Committee's hearing "The Quarterly CARES Act Report to Congress" scheduled for 10 a.m. EDT today.
British tycoon Philip Green’s Arcadia fashion group has collapsed into administration, putting over 13,000 jobs at risk and becoming the country’s biggest corporate casualty of the COVID-19 pandemic so far, administrator Deloitte said yesterday, Reuters reported. Arcadia owns the Topshop, Topman, Dorothy Perkins, Wallis, Miss Selfridge, Evans, Burton and Outfit brands, trading from 444 leased sites in the UK and 22 overseas. Deloitte said that the stores will remain open, or reopen when permitted under the government’s COVID-19 restrictions, and no redundancies were being immediately announced. “We will now work with the existing management team and broader stakeholders to assess all options available for the future of the group’s businesses,” said Matt Smith, joint administrator at Deloitte. He said Deloitte would rapidly seek expressions of interest and expected to identify one or more buyers to ensure the future of the businesses.
Amid the ongoing financial distress caused by the COVID-19 pandemic, bankruptcies are set to rise dramatically, according to a commentary in Fortune. The business busts will strike small firms disproportionately, which is bad news for more than just the business owners. It’s bad for the whole economy, because the surge of financial pain may overwhelm the bankruptcy system. The worrisome outlook emerges from new research by Robin Greenwood of the Harvard Business School, Benjamin Iverson of Brigham Young University’s Marriott School of Business, and David Thesmar of the MIT Sloan School of Management. Their findings are full of surprises, starting with the reality of bankruptcies in the pandemic so far, according to the commentary. Despite a parade of high-profile chapter 11 filings, especially in retail — J.C. Penney, Neiman Marcus, J. Crew, Brooks Brothers — overall bankruptcies through August were “actually 1% lower than in the same timeframe in 2019,” the authors report. It’s no illusion that big companies were more likely to file during the first eight months of 2020, but small businesses were much less likely to file. Maybe that’s because they still had some Paycheck Protection Program funds. Or maybe, as a Jeffries note to clients hypothesized, it’s because many small businesses were so strapped they couldn’t afford to hire a bankruptcy lawyer. In any case, the researchers argue that the numbers have to rocket. “We expect overall bankruptcies to increase by as much as 140 percent in the current year,” they write. “By all metrics, corporate financial distress is set to increase.” Economists don’t see bankruptcies as necessarily bad. When tough times strike, some businesses inevitably will struggle; the bankruptcy process helps sort out which should be given a second chance and which should be liquidated. The resulting reallocation of capital and labor, painful as it may be, helps to rebuild the economy. The danger in the pandemic crisis is that the process may not work as it should. That’s partly because “the balance sheets of small firms are hit the hardest by the current recession,” the researchers find, which is a problem because “small firms restructure very rarely.” Instead of working things out with their creditors, they mostly just fail. They’re less likely to get a second chance because some of their most valuable assets, such as the entrepreneur’s know-how, can’t be pledged to investors. Read more.
*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.
Sycamore Partners is finalizing a plan to buy assets of bankrupt Ascena Retail Group Inc., including the Ann Taylor and Loft brands, Bloomberg News reported. The private equity firm is offering to buy the brands from Ascena before the company asks for court permission to confirm its bankruptcy plan. The offer would need court and creditor approval. Ascena’s bankruptcy plan left room for a potential bidder to emerge through a sale process while also allowing lenders to take control of the business if a buyer didn’t materialize. A hearing to confirm the company’s chapter 11 reorganization plan was delayed to tomorrow when U.S. Bankruptcy Judge Kevin R. Huennekens will be asked to approve and finalize the plan in court. Ascena recently got court permission to sell its Justice brand to an entity formed by licensing firm Bluestar Alliance LLC for about $90 million. Bluestar had the highest and best offer over lower bids from an entity called Premier Brands Justice and an affiliate of WHP Global, Bloomberg reported.
Francesca’s Holdings Corp. is preparing to file for bankruptcy, Bloomberg News reported. The boutique-style women’s clothing chain could file as soon as this week, though the timing and plan could still change. Francesca’s problems predate the disruption that came in the wake of the pandemic. It posted two years of losses and scrapped a strategic review last year after top executives departed. The Houston-based retailer named Andrew Clarke as its new chief executive officer in February after a delayed search. Clarke earlier headed the Loft chain of Ascena Retail Group Inc., which has also made a trip to bankruptcy court this year. Francesca’s said in September that it had hired advisers to explore strategic alternatives, including bankruptcy. Last week, it announced that it would permanently close about 140 of its 700 stores and seek bankruptcy protection if it couldn’t raise more capital.
